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Tuesday, 8 October, 2002, 07:00 GMT 08:00 UK
Honda insists it will stay in the UK
An aerial view of the Honda plant at Swindon
The Swindon plant employs more than 4,500 workers

Honda has put a brave face on its ability to produce cars in the UK, regardless of whether or not the country adopts the euro as its currency.

Honda worker
Honda is in talks with the trade union
"As a preference, Honda would rather be in the euro," managing director Ken Keir said in an interview with BBC News Online ahead of the 10th anniversary of Honda's factory in Swindon.

"But as a Brit, it's obvious it is down to the British people," Mr Keir said.

"We will manage our business according to the British people's wish."

No fresh cash

However, Honda has previously made plenty of noise about the difficulties it faces due to the strength of the UK currency.

During the summer, the president of Honda Europe, Minoru Harada, said the pound would have to fall 15% against the euro before the company's UK manufacturing operations could return to profit.

Last year, Honda Europe suffered losses of more than 300m euros (189m; 296m), the majority at Honda UK.

And success in Europe remains Honda's biggest challenge, Honda president Hiroyuki Yoshino said as he unveiled the company's new Accord at the Paris Motor Show.

So it did not come as a massive surprise that when Honda unveiled a three-year expansion plan during summer, there was no fresh investment destined for the UK.

Trade union

All has not been well at Honda's plant in Swindon either, where relations between company bosses and workers - which Honda prefers to call 'associates' - appear to be strained.

Honda car being exported to the US
Honda UK is exporting cars to the US
Honda has for years refused to recognise trade unions at its plant in Swindon.

But late last year, about one in four of the workers voted in favour of being represented by unions.

And last month, union members threatened to strike over a demand for full negotiating rights.

"We said we would recognise [last year's] vote and we're in very amicable discussions with the unions now about coming to an agreement on a relationship," Mr Keir said.

Any agreement between Honda and local union representatives could prove controversial if, as is expected, it includes a clause which makes it compulsory to settle disputes through arbitration rather than strike action.

Other Japanese car makers in the UK have previously entered into similar no-strike agreements with unions.

Still in the red

But despite all this, Mr Keir insisted that Honda is here to stay.

"The exchange rate and everything else made it tough," Mr Keir acknowledged.

But he added: "You don't spend 1.15bn and not consider it a long-term investment."

Mr Keir said he expects Honda Europe to be profitable "within the next two to three years".

Fresh investment

Mr Keir's comments suggest that Honda has dramatically changed its tune.

The car maker has previously blamed the strong pound and the weak euro for its widening losses and for previous cut-backs in Swindon.

In November 2000, Honda even said it would not build a new manufacturing plant in the UK because of currency concerns.

But within a year, it had done so anyway.

Exporting to Japan

Last September, Honda threw open the doors to a second car factory in Swindon - the first new car plant to be built in the UK in eight years.

The new factory brought Honda's investment in Swindon to 1.5bn and its workforce to more than 4,500 people.

Since then, Honda Swindon has raised production to 130,000 cars a year, with the goal of boosting it further to 200,000, Mr Keir said.

"We are now exporting cars to the US and back to Japan, so we can manage the business and, obviously where possible, counter any exchange rate difficulties," said Mr Keir.

Honda exports its sports utility vehicle CR-V to the US and its Civic cars to both the US and Japan, as well as its exports to continental Europe and the Middle East.


Cars and strategies

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See also:

10 Dec 01 | England
10 Sep 01 | Business
27 Mar 01 | Business
22 Nov 00 | Business
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